Analysis Grain maize
Corn market waiting for direction from South America
Where fear of the omikron variant of the coronavirus affects the wheat market, this is much less noticeable with maize. A demanding market for biofuels helps price formation. Now that the North American harvest has been completed, all eyes are on South America.
The last remnants of grain maize in the United States and Europe are currently being used up. In the European Union, the fact that the harvest started late due to a cool summer is a factor. Skyrocketing gas prices have hurt harvesting as nearly all corn has to be dried for storage. Plots were even left standing because of these costs. Finally, gas prices fell again.
Fuel market as an engine
It is precisely the fuel market that is an engine for the international maize market. The demand for ethanol is good and the margins that can be made, especially in the United States, provide a stable basis. Now that harvesting is almost complete there too, the price on the CBoT in Chicago is mainly moving sideways with small outliers.
The eyes of the corn market are now on South America. Argentina and Brazil. It is dry, which is a bit of a nuisance for the crops. There are no real issues (yet). This continent should give direction to the international maize market in the coming months. Meanwhile, the Chinese government announced that a record amount of maize has been harvested in the country. In particular, the purchasing behavior of the Chinese in the United States is of decisive importance for the market. This applies to maize and soy.
Puzzle between crops
American farmers in the Midwest are puzzling over the two crops. Maize requires a lot of input from nitrogen fertilizers and that makes it an expensive crop for next year. The soy price must be at such a high level to make it interesting. Fewer hectares of maize means more market opportunities and as a result the market is actually increasing. An interesting game that will continue to be played in the United States until the seeders actually start running.
In Paris, January contract on the Matif futures market has gone through a similar movement as wheat. December 3, the contract closed at €245 per tonne, but Monday December 6 it has to give up something again and it remains around €244. What helps the market is that it has become an attractive feed raw material now that wheat is relatively expensive.
US listing makes a profit
In the United States, corn prices on the CBoT have been able to make some profit again. At the end of November, a converted price of $223 per tonne was achieved, but on December 3, the first available contract closed again at $230,70. We haven't seen a price level above USD 230 for a long time, except for one day in November.
The corn market is now doing a sample side way trading where prices mainly move horizontally. If the rumors surrounding the drought in South America swell (led by the La Niña weather pattern), an upward movement is possible. That was the case last season, which was the start of a solid rally. It is still too early to announce such a move again, but the ingredients are there.
Niels van der Boom
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